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The Big Mac succession

Jim Cantalupo's sudden death brought out the best in McDonald's board

AT HIS first annual meeting as chief executive, Jim Cantalupo faced an angry shareholder displaying photos of a filthy McDonald's toilet and demanding action. “We are going to take care of it,” he pledged. And he did. His strategy of ending the rapid expansion of the world's biggest fast-food company and refocusing it on providing better meals in cleaner restaurants with improved service was starting to produce encouraging results. Then, on April 19th, he suddenly died. The death of a leader at such a critical time can ruin a company. But, thanks not least to Mr Cantalupo, it will probably not ruin McDonald's.

Mr Cantalupo was a McDonald's veteran. He joined the company in 1974, as an accountant in its headquarters near Chicago. As head of international operations, he presided over much of the globalisation of the Big Mac: McDonald's now has more than 30,000 restaurants in 119 countries. Although promoted to president, he was passed over for the top job when Jack Greenberg was appointed chief executive in 1998.

Then McDonald's began to stumble badly. Service levels came in for increasing criticism, sales began to fall and the company suffered its first quarterly loss. It also became embroiled in the debate about obesity and the role of fast food. McDonald's was even sued by some parents for making their children fat. (Although this failed, a future lawsuit may yet succeed.) Mr Greenberg put a recovery plan into action and vowed to stay on to execute it, only to be forced out by worried investors. The board turned to Mr Cantalupo, who came out of retirement to take over as chairman and chief executive in January 2003.

Mr Cantalupo, who was 60, died of a suspected heart attack at a huge convention in Orlando, Florida, for more than 12,000 employees, suppliers, owners and operators of McDonald's restaurants worldwide. It was the sort of big meet-the-troops event that the affable Mr Cantalupo enjoyed.

Those members of the board already in Florida quickly assembled and others joined by phone. Within six hours, Charlie Bell, a 43-year-old Australian who had been appointed chief operating officer by Mr Cantalupo and had been working closely with him, was made chief executive. Andrew McKenna, 74, the board's presiding director and also the boss of Schwarz Paper, which supplies McDonald's with lots of packaging materials, was appointed non-executive chairman.

The speech that Mr Cantalupo was due to give to welcome the delegates was later given by Mr Bell, who joined the McDonald's empire when, aged 15, he got a part-time job in an outlet in a suburb of Sydney. So he knows how to flip a burger. The delegates were clearly saddened, but they gave Mr Bell, the first non-American to lead the company, a resounding reception. Mr Cantalupo would have approved.

So did Jeffrey Sonnenfeld, head of the Chief Executive Leadership Institute at Yale University. “It was a board operating at its finest,” says Mr Sonnenfeld, author of “The Hero's Farewell”, a book about the contentious job of selecting a new boss.

Concerning Mr Cantalupo, the McDonald's board has twice acted impressively, he says. First, it acted decisively in reversing course and turning to Mr Cantalupo when things went wrong. Second, it acted swiftly to execute a succession plan that Mr Cantalupo himself had put into place, even though he was expected to remain in the job for several more years. Mr Bell had been widely acknowledged as Mr Cantalupo's heir apparent.

Succession planning can be fraught with difficulty, and is all too often neglected. Vodafone had no succession strategy in place when, in December 2002, Sir Christopher Gent, its chief executive, said he would leave. A search for a replacement led to Arun Sarin, a non-executive director, being given the job. Now Vodafone operates a succession-planning process in every country where it has a business. But more formal procedures, though on balance superior, can cause difficulties, especially if an officially anointed heir starts to get restless (ie, Prince Charles syndrome). And it takes a trusting, well-disciplined board to stick to a succession plan, as the General Electric board did when Jack Welch groomed three potential contenders for his job.

Burger and Coke

A sudden death can be the toughest kind of succession to deal with. Some bosses are said to leave a sealed envelope holding the name of a preferred successor in the event of a fatality. Yet the succession at McDonald's, forced on it by tragic circumstances, contrasts sharply with that now under way at Coca-Cola. Ever since Roberto Goizueta, Coke's pioneering boss, died of lung cancer in 1997, the firm has been beset by troubles. Douglas Ivester was appointed quickly to replace Mr Goizueta, but two years later was forced to step down. In February, his successor, Douglas Daft, suddenly announced that he would retire by the end of this year. Coke is said to want James Kilts, the boss of Gillette, for the top job—but he may not want it. Publicly looking outside its ranks for a leader is interpreted by some analysts as evidence of management weakness within.

McDonald's could not be accused of that, although Mr Bell still has to prove his worth. New menus, featuring smaller portions and such healthier things as salads and bottled water, are reviving the company's image. But at the same time the company cannot afford to drive away its many fans of burgers and fries. Simply getting them to come back more often could do wonders for McDonald's profits. There are valuable lessons to be learnt from successful markets, such as Australia and France—both places where Mr Bell has worked. But there remains a long way to go, and things could yet become extremely difficult. Even planning well ahead and having a chosen successor ready and waiting, though better than not doing so, is no guarantee that the successor will actually be a success.